Corporate raiders train their financial sights on some of the biggest firms in India

Corporate raiders train their financial sights on some of the biggest firms in India

Suddenly it's open season on companies. From coast to coast, corporate raiders are training their financial sights on some of the biggest corporations in the land, plunging into negotiations or striking multi-crore deals. Even smaller companies have come in for attention.

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Palakunnathu G Mathai

Indranil Banerjie

June 30, 1987

ISSUE DATE: June 30, 1987

UPDATED: January 6, 2014 16:25 IST

K.K. Birla: A stake in GKW

Suddenly it's open season on companies. From coast to coast, corporate raiders are training their financial sights on some of the biggest corporations in the land, plunging into negotiations or striking multi-crore deals. Even smaller companies have come in for attention. Two in the south have, in fact, changed hands.

Clearly, take-over time is here - and the heat is on enterprises with significant overseas shareholdings. Among them: the Calcutta-based Chloride India, a GEC (India) subsidiary Genelec, Jokai India, Tribeni Tissues and the Bombay-based Mather & Piatt. The list is even longer if Guest,Keen Williams (GKW) and McLeod Russell are counted.

Reflecting the action, the shares of at least one target of the take-overs plunged, with broker son the Calcutta Stock Exchange kicking up a shindig, till the stock exchange authorities wrote to the Government asking it to intervene to help halt the slide.

The rash of take-overs this summer has partly been prompted by the fact that many companies, especially former British-controlled ones, are ripe for the taking. Most of them are in Calcutta. and P.L. Roy, managing director of Genelec, which itself is up for sale, argues: "It is only the old imperial British houses that are disinvesting in India, because they want quick returns on their money and don't see the long-term benefits of remaining in India".

They are also unloading some of their equity because their domestic counterparts are not flourishing. Example: GKW, battered by a downturn in the automobile and electrical sectors, made a Rs 42-Lakh loss last year. And the engineering company needed to raise Rs 52 crore over the next four years for modernisation. What the Rs 213-crore outfit clearly needed was a Galahad. Enter K.K. Birla, whose companies bought almost 7 per cent of the 46.8 per cent British shareholding in GKW, put in a director on the board, with another to follow after the Reserve Bank of India clears the transaction. K.K. Birla has the first option to buy more shares should GKW in the UK disinvest further to some 25 per cent, as it is expected to. The Birlas, on their part, believe that GKW will fare better, once the electrical and automotive sectors revive. If that happens, they may have bagged a potential winner relatively cheap.

K. Chhabria: Shopping for Mather & Platt

In some cases, the foreign principals themselves are in a financial bind, and wish to hawk their local subsidiaries. Chloride (UK) plc has a crippling debt burden which it is obliged to trim as part of a British bank's rescue package last year. So it put its 51 per cent controlling interest in Chloride India, the battery company, on the market - a point the highly profitable subsidiary's officials vigorously contested for almost a year.

Last fortnight, however, Chloride India Chairman Jahar Sen Gupta conceded that the company had been put on the auction block. The snag so far has been the price - a daunting Rs 80 crore to Rs 100 crore, way above the market value of the shares. So Chloride (UK) has come up with a solution: either a "split" sale whereby the shares would be hawked to more than one Indian buyer, or a sale of part of its shareholding.

The big question is: who are in the race for the company? The financial press has identified MacNeill & Magor's B.M. Khaitan as being in the running. The JK group's Hari Shankar Singhania and Dubai-based marauders Manohar and Kishore Chhabria also have reportedly made a joint bid for Chloride. But all four are quick to dismiss the reports. Said Singhania: "There's absolutely no substance to all this. We're not interested in Chloride India." Added Kishore Chhabria: "We're not negotiating for Chloride. We have not talked to Singhania either. Our plate is full."

Whether the Chhabrias are buying or not, they certainly have their hands full. After snaring Gordon Woodroffe and establishing a presence in Dunlop India along with R.P. Goenka, they are in the driver's seat at Shaw Wallace following a bitter battle for control. What is more, the take-over artistes are now negotiating for Mather & Platt, the Rs 36-crore Bombay-based pumps, motors and machinery company. While Kishore Chhabria says flatly that "all these news reports about our bidding for Mather & Platt are inspired," reliable sources claim the contrary and assert that the Chhabrias have been talking to the Australian Wormald International, which owns 60 per cent of the company's UK parent. Wormald wants 14 million (nearly Rs 30 crore) for the shares, and the Chhabrias are trying to beat down the price.

K.K. Modi: Moving into Genelec

Mather & Platt's blandishments for a suitor are not merely its profits (almost Rs 6 crore last year), Its order books are full for the next year and it does not owe a rupee to any bank. So a raider will not have to spend too much time in the nitty-gritty of running the company, and he could use its healthy balance sheets to raise loans for funding other take-overs.

Tribeni Tissues (a sister company of ITC because it is part-owned by British American Tobacco (BAT) abroad) may also change hands in the near future. BAT has offloaded its interest in Tribeni to Gillette, which recently made an entry into the country by promoting Indian Shaving Products.

Again, the attractions of what is essentially a sound tea company have lured practically every other tea company in the eastern region into bidding for troubled London-based businessman Rajendra Sethia's Jokai India. Last month, a financial daily claimed that Warren Tea had written to Punjab National Bank (PNB) seeking to buy 74 per cent of Jokai's overseas equity (the bank had acquired this as collateral for loans to Sethia's Esal Commodities). Warren Tea Managing Director Vijay Goenka denies having put in a bid, a contention backed by PNB Chairman J.S. Varshneya. Still, PNB has received 10 to 15 offers for the company. It is also true that the bank will unload the shares - if it can establish its title to them. Here, buyers have clearly jumped the gun because Esal's liquidators have laid stake to the shares and Jokai Tea Holdings Ltd, the UK-based holding company of Jokai India, has refused to register the equity in PNB's name. The bank filed suit against the holding company a year ago, and Varshneya quite validly points out that any offers are meaningless till the title is established. "When we don't have anything to sell, how can there be an offer? The question doesn't arise."

The question does, however, arise in the Genelec case. Says Managing Director Roy: "GEC (India), which has a 33 per cent stake in Genelec, has the intention of divesting itself of its holding to raise funds for its own modernisation and expansion programme." He argues that selling Genelec is a cheaper way of raising money than obtaining interest-bearing loans. Genelec is raking in modest profits (Rs 46.2 lakh in 1985-86), so the gambit could make sense.

The head offices of the Calcutta based Tribeni Tissues and Chloride
India are likely to change hands because of disinvestment decisions
taken abroad in the hope of getting quick returns.

The company is being pursued by a number of businessmen who have so far remained in the shadows, the exception being K.K. Modi. Roy declines to reveal any names or even to confirm whether Modi has swung the deal. Modi was abroad last fortnight, but he said in an interview last month that Modis had bid for only half the GEC (India) holding in Genelec.

Certainly, Modi is not the only industrialist whose name has figured prominently in corporate raids. Another is B.M. Khaitan, whose spree of acquisitions (McNally Bharat, Standard batteries and, more recently, India Foils and Metal Box) has put him in the spotlight. Many observers believe that his newest acquisition is tea company McLeod Russell, something he stoutly denies.

Last month, the UK-based George Williamson, which holds a majority stake in MacNeill and Magor, bagged 80 per cent of McLeod Russell (UK). The latter firm in turn has a 40 per cent stake in three Indian tea Arms, including McLeod Russell (India). Mcleod Chairman N.A. Atal admits that the three companies will act in consort with Mac Neill & Magor. The question then is: does Khaitan now control all four concerns?

No answers may emerge, because Khaitan is a cagey industrialist. Inevitably too, his name has been linked with bids for companies as diverse as Chloride, ITC and Bata India. "But where on earth will I get the money for all these companies?" Khaitan asks, dismissing the rumours with a laugh.

Meanwhile, it is clear that the take-over mania is spreading to the minor leagues too.Last January, the JK group bought from Madura Coats 25 per cent of the shares of the Madurai-based Fenner India. And last month Raghu Modi, who runs the Rasoi group of companies, finally got his nominees on to the board of the Bangalore-based J.L. Morrison Sons and Jones (India). He bought a 22 per cent stake in the drugs and toiletry company.

The sudden spurt of takeovers and attempted raids on companies inevitably raises several questions. Since foreign companies are disinvesting, are they losing faith in the Indian business environment? The answer is probably no, and the disinvestment is mostly linked to problems elsewhere.

Indeed, as Saroj Poddar (K.K. Birla's son-in-law and the man considered likely to take charge of GKW) argues: "The fact that Indian businessmen are ready to take on companies that are sick but have potential is another indication of industry's health and optimism." And Singhania adds: "By and large the climate remains good in the country. With a competitive society, mergers and takeovers should increase. They are a normal thing in the West." Quite obviously, they are well on the way to becoming a normal event in India too.

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